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Schalke 04 scores 265% ROI from esports venture after forced exit

After relegation from the Bundesliga, the German club has sold its League of Legends European Championship (LEC) spot to Swiss esports organisation, Team BDS. 

Photo Source: Esports Observer 
In what could be the first example of an esports business being sold to fund a sports one, FC Schalke 04 has completed the sale of its LEC license to Swiss esports organisation Team BDS. 
 
According to a statement by Schalke 04 Esports, their place will be sold at the end of the Summer Split 2021 for €26.5m (£22.8m), which represents a 265% ROI over 3 years, as reported by Strive Sponsorship
 
The sale was first suggested back in February, when it became apparent that the Bundesliga club was having some serious economic issues and was concerned with the threat of relegation, which has since come to fruition.
 
Schalke was also dealing with the resignation of its former president, who was involved in a health scandal surrounding a COVID-19 outbreak in one of his properties. Furthermore, a year ago, Schalke’s debt rose to a staggering €200 million, according to ESPN.

Whilst private investment initially flooded into esports teams from investors looking to benefit from the growth of the industry, raising funds has become a lot more challenging given teams’ inability to monetise their audiences. Just look at Guild Esports, who announced a loss of £4.3m over a six-month period, ending March 2021. 

However, this investment from Team BDS does demonstrate the benefit of investing in a franchise over a non-franchise esports organisation. This is because of the scarcity value of the place, and the appreciation in value this place has as the league scales – similar to what is being experienced with the valuations of franchises in the MLS (but on a smaller scale).  
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THOUGHT FOR THE WEEK 
Photo Source: GIPHY/ South Park
One of Europe's leading accountants and regulatory advisors has told Off The Pitch ($) that the British government should "seize the opportunity" to give English football an independent regulator and set an example for excellence in global sporting governance. 

"Given where English football sits in the world, I think there's a real opportunity to clean this up and set standards for other leagues, other jurisdictions to follow suit," says Toby Duthrie, Founding Partner of Forensic Risk Alliance. 

Duthrie says that it is "nuts" that an industry as culturally significant as football has been allowed to self govern until now, and describes the game's appetite for enforcement of its own rules as "pathetic". 

Haihan Luo, a masters student at Loughborough University London, believes that this is an "interesting proposal". Luo suggests that there is a "parallel with the banking and accounting industry calling for more independent regulatory mechanisms after the 2008 financial crisis". 

Should sport continue to self-govern? What do you think? Let me know by replying to this email . 
WEEKLY ROUND UP 
Here's a few of the top articles that I've come across this week. I hope you enjoy!
Photo Source: Sports Illustrated
Governance and Finance
Photo Source: Formula1
Sponsorship and Marketing
  • Formula 1 announce Crypto.com as inaugural global partner of the F1 Sprint series.
  • TikTok has been announced as Wrexham AFC’s new shirt sponsors in a funny new video featuring Rob McElhenney and Ryan Reynolds. 
  • CoinDCX, India's largest cryptocurrency exchange, will sponsor the Sri Lanka national cricket team in their upcoming series with India.
Photo Source: UEFA
Broadcast and Media
Photo Source: Evening Standard
Technology
SPORTS PUNDIT NETWORK

For the latest edition of the Sports Pundit Networking Series, I caught up with my colleague at CSM Sport & Entertainment, Jordan Williamson. Starting out within CSM's talent team, Jordan has worked with athletes from England Rugby and Cricket, as well as more recently with Liverpool goalkeeper, Alisson Becker.

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Introducing Sports Pundit Explains... Sponsorship with Andy Marston and Murray Barnett. The series aims to deep-dive into the industry.

In Episode 1, Murray discusses his experiences F1, World Rugby, and and 26West Sport, as well as his motivations for starting this podcast.

Future guests include Tim Ellerton, Commercial Director at British Olympic Association, and Zarah Al Kudcy, Head of Commercial Partnerships Development at Formula 1. 

Available on all (good) podcast platforms now. Simply search 'Sports Pundit Explains...
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Quick ask. It takes me hours each week to put these newsletters together so if you enjoyed this edition, it would mean a lot to me if you could share on social or forward to friends and colleagues! Thank you. 

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